ETFS physical aluminium, ETFS physical lead and ETFS physical zinc complement the existing industrial metals ETCs range comprising ETFS physical copper, ETFS physical nickel, and ETFS physical tin. The new products give investors easy access to physical industrial metals through an ETC.
The physical ETCs differ from those that track commodities indices in that investors’ capital is used to buy the metals, so the returns reflect the movement in the spot price rather than investment in futures contracts.
ETF Securities believes investors are looking at physical assets such as aluminium lead and zinc as a way to hedge against sovereign risk, currency devaluation and potential inflation. The firm also sees its new ETCs as a way of gaining exposure to rising commodity demand from China and other emerging market economies, which is pushing up prices.
The new ETCs have been designed to reflect the pricing, delivery and rules of the London Metal Exchange. The metal will be stored in warehouses that are approved and audited by the LME. As well as an annual management fee there are storage costs and insurance fees.
ETF Securities received criticism from some commentators when it launched its first three physical industrial metals ETCs at the end of last year. They were concerned about the impact that keeping the metals locked away in a vault could have in potentially distorting market prices and affecting global growth by limiting supply to countries such as China and industries that rely on base metals.
However, physically backed products have been popular with investors, so the new ETCs may appeal to sophisticated investors who want exposure to specific metals with the comfort factor provided by tangible assets.